Agenda item

Review of Exit Packages

The purpose of this report is to provide an update to Audit Committee on findings and recommendations from a review of exit packages paid to former employees, as requested by the Section 151 Officer following the issuing of a report under s114 and s114A of the Local Government Finance Act 1988 on 23 May 2022. 

Review of Exit Packages

The purpose of the report was to provide an update to Audit Committee on findings and recommendations from a review of exit packages paid to former employees, as requested by the Section 151 Officer following the issuing of a report under s114 and s114A of the Local Government Finance Act 1988 on 23 May 2022.  (A copy of the report has been filed with the signed minutes).

K. McDonald, Head of Internal Audit and Risk Management introduced the report and highlighted the main issues.  He advised all that Internal Audit had undertaken a review in accordance with the Section 151 Officer’s report and between June and November 2022 provided detailed findings to the Section 151 Officer for consideration as to whether any further unlawful payments have been made.  Internal Audit had been requested to prepare a report to Audit Committee, detailing a summary of findings from work that had been undertaken.  This report had therefore been prepared to update Audit Committee on findings related to weaknesses in systems and procedures and associated recommendations made.

It was reported that in addition to this work, Internal Audit’s plan of work for 2022/23 was agreed by Audit Committee on 23 March 2022.  The 2022/23 Strategic Audit Plan included a proposed review of recruitment and retention – processes governing changes to terms and conditions and how employees leave the organisation.  This planned internal audit was currently underway and the findings would be reported to Audit Committee in the normal manner, once completed. 

It was stressed that this report was solely written to examine the processes and systems in place relating to the S151 report and did not go into detail about individual cases.  However, the review did identify that a number of exit payments made to former postholders did not comply with the requirements of the Localism Act 2011.  There was therefore the potential that these payments could be unlawful.  Internal Audit was aware that the County Council was seeking appropriate advice in order to determine whether payments made were unlawful and this aspect would be considered further by the Section 151 Officer and Monitoring Officer.  It was reported that where any additional action was identified by the Section 151 Officer and / or Monitoring Officer, subsequent reports to update Audit Committee would be prepared as required.  

The Chair thanked the Head of Internal Audit and Risk Management for the detailed report which could not have been easy to draft especially with such a tight remit.  The Chair questioned whether this was a systemic issue within the Council.  In response it was stated that Internal Audit’s review of recruitment and retention would hopefully answer that question once finalised. 

Councillor Dale reported that she believed there were other exit packages that needed investigated but had not fallen within the scope of this report.  She felt that there needed to be a holistic approach taken to investigate further.  She spoke about the changes to the Constitution, the Staff and Appointments Committee, Pay Policy Statement and other policy actions already being put in place which she hoped would ensure this issue did not happen again or was left to keep occurring, particularly as the Council was currently going through a voluntary redundancy scheme.

The Head of Internal Audit and Risk Management confirmed that he was aware of other former postholders not included in the initial list, but these would be picked up as part of the wider piece of work being carried out.  However, he confirmed that this review had identified a number of significant weaknesses within the County Council’s control framework governing redundancy / exit packages, and non-compliance with relevant legislation and policies that were in place and had made several recommendations to the Section 151 Officer.

Councillor Jackson stated that he had asked for a report to be prepared but had initially asked for a wider scoping review to take place as he suspected there was more that needed probed.  He commented that it was a shame that it had taken this long for the Council to investigate.  The extent of some of the payments made were very high with some of the voluntary redundancy packages highest in the country.  Payments had not been reported to the Leader and the Cabinet.  He asked for more detail to be provided to Audit Committee.  The Caller report mentioned unusual settlement agreements which needed investigated along with the overall lack of recording and transparency.  He stated that he believed the payments made could fall into illegality. 

The Monitoring Officer stated that all points made were valid, there had clearly been failings, but the Audit Committee had a clear remit and Members had to be careful not to overlap with other statutory duties and responsibilities of others.  It would be for the Section 151 Officer and the Monitoring Officer to consider if payments were legal or unlawful and then report to the appropriate committee(s). 

The Section 151 Officer stated this report had been commissioned for a specific purpose and the summary here today should hopefully give assurance to Audit Committee that things were being investigated.  All aspects would be fully looked into before a judgment was made but that would be a matter for the S151 Officer and Monitoring Officer. 

Councillor Dale spoke about the statement of accounts and the Audit Committee’s crucial role in scrutinising them as part of the three lines of defence.  Members were able to look at the accounts and see what payments were made.  If Audit Committee had concerns, they should have been raised.  She stated that she had highlighted problems and issues in the past.

The Chair stated that he was keen to follow up the recommendation made by the Head of Internal Audit and Risk Management to propose a review of any implications regarding the exit package that did not appear to have been reported (or correctly categorised) in the appropriate Notes to the Accounts within the respective Annual Statement of Accounts.

The Leader stated that he was deeply troubled about the issues highlighted within the report and the implications relating to the Council’s processes and systems of internal control.  He had been excluded from discussions around these payments and called for a full investigation.

Councillor Oliver stated that the report showed that there had been significant failures within the system including the Pay Policy Statement.  He queried why sections of the Pay Policy Statement had been removed in certain years.  He spoke about being a former Cabinet Member who had raised concerns.  He said Members had not been advised about former officers exit packages and when asked information was refused.  He had additional information and evidence that could be passed to officers if required.  He stated that accountability was important, and the cultural changes needed within the Council would only happen once this was embedded.  

The Section 151 Officer confirmed that she had received the files from Internal Audit.  She would review them in conjunction with the Monitoring Officer and take guidance.  At the moment they had the information needed but asked for time and space to consider fully.

The Monitoring Officer respectfully asked Members to manage their expectations going forward with this issue.  She advised that depending on what conclusions were reached would determine which democratic path would be followed including where such findings would be reported.

Councillor Jackson asked that Audit Committee be kept informed of progress made with this issue.

RESOLVED that that Audit Committee:

(a)  notes the findings and recommendations highlighted by Internal Audit;

(b)  considers the update as a source of assurance at the time it considers the Annual Governance Statement and as part of Audit Committee’s role in ‘monitoring the effectiveness of the control environment, including arrangements for ensuring value for money, supporting standards and ethics and for managing the authority’s exposure to the risks of fraud and corruption.

The Leader withdrew from the meeting at this point.